Frequently Asked Questions

Here are some questions we will need to answer to determine if your property will be helpful to us:

• Is the property void of any liens?
• Are there any environmental concerns with the property?
• Can our charity actually use the property for our work?
• Is the property marketable and salable within a reasonable period of time?
• What are the costs associated with accepting and holding the property?
• Can we realize a positive net return on this property?

You will receive an income tax deduction equal to the appraised fair market value of the property. An independent qualified appraisal is required for this purpose and it is up to the donor to acquire such an appraisal. Donating your property may also reduce your estate costs and taxes as well.

In many cases the answer is yes. Real estate can be transferred to a charitable remainder unitrust which will provide the donor with tax reduction benefits as well as setting up an income stream for beneficiaries such as a spouse, children and/or other loved ones.

The key question to determine is whether or not your donation has a legitimate use related to the charitable mission of our organization. For example a gift of art work or a stamp collection can enhance an educational purpose; a gift of a piano or other musical instrument can enhance a musical program; a gift of kitchen equipment can enhance a feeding program, etc. If your gift is related to our charitable work then your income tax deduction is based on the fair market value of the property. For gifts of property with a value of $5,000 or more, an independent qualified appraisal of the property is required by the IRS.

If your gift of personal property has no relation to our charitable work, then your tax deduction is limited to your cost basis in the property. We suggest that you acquire IRS publications 526 and 561 to review all the comprehensive information available for gifts of personal property.

In some cases the answer is yes. Personal property can be transferred to a charitable remainder unitrust which will provide the donor with tax deduction benefits as well as setting up an income stream for beneficiaries such as a spouse, children and/or other loved ones. Only personal property with a value of $50,000 or greater should be considered for this purpose.

A gift annuity contract becomes a legal financial obligation of American Heart Association and is backed up by all our assets.

Both have distinct advantages. A gift of cash will produce a larger tax-free portion of the annuity. A gift of stock can increase your income because of reduced capital gains cost. Both assets produce an equal annuity rate and charitable income tax deduction.

A charitable gift annuity can only be set up for one or two lives. This is typically a husband and wife, but it could be two siblings, or two friends, etc. Beneficiaries must be at least 65 at the time of the gift. For more flexible beneficiary choices, you could consider a charitable remainder unitrust.

A commercial annuity, typically sold by banks and life insurance companies, will provide the owner with fixed or variable income based on commercial rates of return. These plans establish their annuity payments based on the assumption that all of the assets in the plan will be used up by the end of the income beneficiaries' lives.

A charitable gift annuity is part guaranteed annuity and part charitable contribution. The donor receives a partial income tax deduction based on the assumed value of the portion of the gift the charity will ultimately receive. A gift annuity establishes its payments on the assumption that there will be something left for the charity at the end of the contract. Often annuity rates for gift annuities cannot compete with the annuity rates of a commercial annuity because of the charitable component in the contracts. But then, there are fewer tax benefits with a commercial annuity.

Yes, you can make a gift now for an annuity contract that will defer your payments to a future date that you decide, typically sometime in your retirement years when you will need the income. In this sense, a deferred payment gift annuity can serve as a type of tax-deferred savings plan that will provide you with guaranteed income in the future.

A Deferred Gift Annuity provides lifetime annuity payments commencing at a future date.  Because of this deferral, payments from deferred gift annuities are higher than from annuities whose payments begin immediately, and donors usually receive a larger charitable deduction than they would for an immediate-payment annuity.  Many donors use deferred gift annuities as a source of supplemental retirement income.  They often create their annuity with funds they had already set aside for retirement savings, and set their anticipated retirement as the date to begin receiving payments.  An attractive option is to establish a series of deferred gift annuities over several years, all scheduled to begin payments upon the donor's retirement.

Yes, you may. Choose whatever date makes sense to you. And remember this: the longer you wait, the larger your payments will be.

One is not necessarily better than the other. Both have distinct advantages. A gift of cash will produce a larger tax-free portion of the annuity. A gift of stock will reduce the donor’s capital gain tax and produce income that will likely be at a lower tax rate. Both assets produce an equal annuity rate and charitable income tax deduction.

A Pooled Income Fund is invested to produce a reasonable income for all income beneficiaries who own units (or shares) in the fund. It works much like a mutual fund whereby a donor invests in the fund and the dollars invested by all the donors are pooled and invested in a common fund to produce income for all income beneficiaries depending on the number of units (or shares) they own in the fund.

Absolutely! You can make additional contributions to your pooled income account at any time, and thereby increase the number of units you own in the fund, which will increase your income.

Gifts of cash or securities to a Pooled Income Fund produce the same result as to the income and charitable deductions you will receive. However, gifts of appreciated securities have the additional benefit of avoiding capital gains taxes.

In working with your team of professional advisors, a number of choices are available as to who would be the best trustee for you. Please contact us to discuss this further.

Typically, such a trust is invested in a balanced portfolio that is designed to produce both income and growth over the term of the trust. An annuity trust may also hold tax-free bonds.

Gifts of cash or appreciated property yield the same result for tax deduction purposes. However, gifts of appreciated property have the added value of avoiding capital gains taxes.

Your income will be taxed according to the type of investments and payout rate of the trust. You will usually pay tax at the ordinary income level on any ordinary income that is distributed, up to your full payment. The rest of your income will be taxed at the next lowest rate, usually as capital gains, then as tax-free return of principal. If you desire to know your taxation rates when you fund your life income gift, you might want to consider a charitable gift annuity or deferred gift annuity.

Yes, subject to certain limitations.

A Charitable Remainder Annuity Trust is a powerful tool that can save you income, capital gain, estate, and inheritance taxes depending on your circumstances and state of domicile. A qualified advisor is crucial to assist you in maximizing these benefits.

In working with your team of professional advisors, a number of choices are available as to who would be the best trustee for you. Please contact us to discuss this further.

If the assets in the trust are liquid such as cash or securities, typically a unitrust is invested in a balanced portfolio that is designed to produce both income and growth over the term of the trust. If the trust assets are primarily nonliquid assets such as real estate or personal property, the trust may be held for growth in capital appreciation rather than current income. At some later date, the nonliquid assets could be sold (avoiding capital gains taxes) to be reinvested to produce income for the income beneficiaries.

Gifts of cash or appreciated property yield almost the same results for tax deduction purposes. However, gifts of appreciated property have the added value of avoiding capital gains taxes.

Your income will be taxed according to the type of investments and payout rate of the trust. You will usually pay tax at the ordinary income level on any ordinary income that is distributed, up to your full payment. The rest of your income will be taxed at the next lowest rate, usually as capital gains, then as tax-free return of principal. If you desire to know your taxation rates when you fund your life income gift, you might want to consider a charitable gift annuity or deferred gift annuity.

In most cases, yes. The value of the trust principal will be determined by a qualified appraisal of the property. However, real estate or other property may not be producing income and thus the income beneficiaries may receive no or very little income until these assets are sold and reinvested to produce income.

Yes, subject to certain limitations.

A Charitable Remainder Unitrust is a powerful tool that can save you income, capital gain, estate, and inheritance taxes depending on your circumstances and state of domicile. A qualified advisor is crucial to assist you in maximizing these benefits.

The mortgage or lien can and should be paid off prior to the bargain sale or with the sale proceeds received by the previous owner. This produces the best tax benefit to the donor/seller. If the charity assumes the lien or mortgage, then this is considered taxable income to the donor/seller.

Assuming there are net sale proceeds to the donor/seller, these proceeds can be used to establish a charitable gift annuity. Or the gift portion of the bargain sale can be used for a gift annuity contract. For example, a donor arranges a bargain sale of real estate with American Heart Association for the sale price of $100,000. The property has an appraised market value of $200,000 thus making this arrangement a bargain sale of $100,000 and a charitable gift of $100,000. The donor can turn around and donate the sale proceeds ($100,000) received in this deal for a charitable gift annuity. This produces the maximum tax benefits for the donor. On the other hand, the charity can agree to a charitable gift annuity contract based on the donated portion ($100,000) of the bargain sale.

When you enter into a bargain sale you receive an immediate infusion of cash from us. This may help bridge the gap between residence sale and purchase of a new residence, or other immediate needs for cash while a sale of your appreciated property is pending.

Yes, in fact, we may also choose to conduct an appraisal for our due diligence purposes, but part of a bargain sale is asking you to choose a qualified appraiser to evaluate the market value of your property. A qualified appraiser not only helps both of us determine your fair market value, but is required by the IRS when you file for a deduction from the bargain sale transaction.

If you negotiate a provision in the Retained Life Estate contract for the right to lease the property for the remainder of your life estate, you can keep the additional money. You remain responsible for the taxes, insurance, and maintenance expenses spelled out in the agreement with the charity.

You are. Most likely the RLE contract will contain a provision that requires you to get prior approval from the charity to make such improvements.

Yes. The use of the asset is yours. Should you decide to lease for a while and then move back in, this gifting concept allows for that.

Yes. As long as the property qualifies under the IRS rules, it can be used to create this type of donation arrangement (i.e., you don't take depreciation or own it in a corporate structure, etc.) Check with your accountant to make sure it qualifies. Motor coaches and yachts qualify as second homes.

Maybe. If the trust is structured a certain way, you’ll be eligible to claim an income tax deduction in the year you set up your trust. However, that means that all of the trust income in following years will be taxed to you as well. Most donors structure their CLTs in a way that does not yield a current income tax deduction so that they don’t have to worry about income tax issues in the future. In both cases, you are able to provide wonderful support to American Heart Association and to pass trust appreciation to your family free of gift and estate tax. We can provide you and your advisors with information that will help you decide which type of CLT will work better for you.

Yes, you may list your grandchildren as beneficiaries. Due to the generation-skipping transfer tax, there are more complications related to a lead trust with grandchildren as beneficiaries than one that passes assets directly to children. Most legal professionals would prefer the use of a Charitable Lead Unitrust if grandchildren are named as beneficiaries.

There is no minimum or maximum term for your Charitable Lead Trust under federal law, although applicable state law may require such a trust to end eventually (typically after several decades). However, if you want to maximize the benefit to American Heart Association and minimize transfer taxes, we can help you determine the optimum term to accomplish your goals. Generally, the longer the term, the lower the taxable gift to your remainder beneficiaries and the higher the benefit to American Heart Association.

Yes, although the higher the amount the greater the potential tax benefit to you and benefit to your heirs.

A CLT can act as a cash gift to us while providing tax advantaged planning to you and your heirs. Cash gifts may support any of the areas that you are most passionate about at American Heart Association.